TY - JOUR
T1 - Investment decisions and the soft budget constraint: Evidence from a large panel of Hungarian firms
AU - Colombo, Emilio
AU - Stanca, Luca
PY - 2006
Y1 - 2006
N2 - This paper investigates the investment behaviour of a large panel of Hungarian firms in the period 1989-99, in order to assess the impact of institutional and regulatory changes on the efficiency of credit allocation. We find that the role of financial factors for investment decisions has changed significantly after the introduction of major financial reforms, and that firms were affected differently depending on their ownership type. Reforms have hardened the budget constraint of private domestic firms, particularly small ones, and reduced informational problems for foreign-owned firms. State-owned firms remained subject to a soft budget constraint. In particular, small state firms became more sensitive to financial conditions, whereas large state firms were unaffected and kept operating under a soft budget constraint. © The European Bank for Reconstruction and Development, 2006.
AB - This paper investigates the investment behaviour of a large panel of Hungarian firms in the period 1989-99, in order to assess the impact of institutional and regulatory changes on the efficiency of credit allocation. We find that the role of financial factors for investment decisions has changed significantly after the introduction of major financial reforms, and that firms were affected differently depending on their ownership type. Reforms have hardened the budget constraint of private domestic firms, particularly small ones, and reduced informational problems for foreign-owned firms. State-owned firms remained subject to a soft budget constraint. In particular, small state firms became more sensitive to financial conditions, whereas large state firms were unaffected and kept operating under a soft budget constraint. © The European Bank for Reconstruction and Development, 2006.
KW - Economics and Econometrics
KW - Financial constraints
KW - Investment
KW - Soft budget constraint
KW - Transition
KW - Economics and Econometrics
KW - Financial constraints
KW - Investment
KW - Soft budget constraint
KW - Transition
UR - http://hdl.handle.net/10807/100229
U2 - 10.1111/j.1468-0351.2006.00238.x
DO - 10.1111/j.1468-0351.2006.00238.x
M3 - Article
SN - 0967-0750
VL - 14
SP - 171
EP - 198
JO - Economics of Transition
JF - Economics of Transition
ER -